Recent research by cryptocurrency market intelligence firm Messari revealed that cryptocurrency fundraising in Q3 2023 fell to levels last seen in Q4 2020.
Depending on your crypto fundraising status a reportThe last quarter recorded new lows in both financing amounts and number of deals. Total financing for Q3 was just under $2.1 billion across 297 deals, indicating a 36% decline in both categories compared to Q2 2023.
Cryptocurrency funding fell to 2020 levels in the third quarter
Masari researchers found that the majority of deals in Q3 were concentrated in early-stage rounds: pre-seed, seed, and Series A investments. Seed funding was the largest stage, raising approximately $488 million across 98 rounds.
Early stage deals increased to 48% of deal share in Q3 2023 from 37% share in Q4 2020, while later stage deals – Series B and other rounds – declined to 1.4% from 8% over the same period. Massari noted that the development shows strategic bear market positioning on the part of investors as they attempt to fund projects that could yield greater profits when the cryptocurrency market moves in a positive direction.
It is worth noting that investors have shifted from later-stage projects to early-stage projects in the past three years, which is evident in the number of deals allocated to each stage in the third quarter.
Moreover, strategic financing deals have increased amid the bear market. Such rounds have seen significant funding from corporate and private equity deals. The total share of financing for strategic deals rose to 22% in Q3 2023 from 0.2% in Q4 2021, indicating that unfavorable market conditions are causing projects to increase short-term bridging rounds or be acquired by larger projects.
DeFi and gaming were among the most funded sectors in the third quarter
In terms of sector funding, the blockchain infrastructure, gaming, and decentralized finance (DeFi) sectors emerged as the most funded in Q3. On-chain infrastructure saw the largest share of capital at 18%, while DeFi recorded the highest number of deals, and the gaming sector received nearly $250 million in investments.
“The services sector, defined by complementary business functions such as marketing, incubators, security and legal services, was the only other sector to receive an average funding of more than $100 million over the past 12 months,” Massari said. “While other sectors are important To grow the cryptocurrency industry as a whole, these four sectors continue to attract the majority of investor attention.” Investors are strategically positioning themselves for a bull market by focusing on projects that can generate greater profits.
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